Angst Over US Inventory Pileups Is Belied by Still-Solid Sales
A pileup of unsold goods at big-name retailers Target Corp. and Walmart Inc. stirred concerns about an economy at risk from an inventory overhang.…
June 27, 2022 at 11:53 AM
3 minute read
A pileup of unsold goods at big-name retailers Target Corp. and Walmart Inc. stirred concerns about an economy at risk from an inventory overhang. But, for now, solid demand is helping soothe some of that anxiety.
Inventories rose an annualized $343 billion in the last two quarters, the biggest back-to-back build in government data back to 1999. Yet stockpiles are less concerning when compared with the total value of sales.
For instance, while the inflation-adjusted retail inventory-sales ratio in March was the highest in a year, it's still well below the average over the last 10 years. And though the ratio for manufacturers has moved up, a closer examination shows that the value of unsold finished durable goods at the lowest level since 2013.
"Overall inventories in the economy are still unusually low, even after a few quarters of substantial builds," said Stephen Stanley, chief economist at Amherst Pierpont Securities. "That reflects how lean inventories were after massive liquidation during the pandemic."
Should demand slow "abruptly, then inventories could become excessive, but, for now, we are far from that point," Stanley said.
To be sure, there is some concern that households will temper their spending on merchandise in the face of faster inflation and as Americans shake off the pandemic by using more of their discretionary income for service-related expenditures.
Nonetheless, consumers have ample financial firepower to keep spending, according to Federal Reserve Bank of St. Louis President James Bullard.
Households "are flush," Bullard said Friday in a speech in Zurich. "They have still $3.5 trillion of kind of COVID aid that is more or less unspent" which is "something on the order of 10% of GDP still sitting in people's bank accounts."
Late last year into early 2022, many companies scrambled to ensure warehouses and shelves had enough merchandise to meet robust consumer demand against a backdrop of uncertain supply networks.
Efforts by Target and Walmart help explain government data showing stockpiles at general-merchandise stores running 1.17 times sales, the highest since 2013. Still, inventory-sales ratios at other retailers remain well below their longer-term average.
Beyond retailers, manufacturers have also been busy proactively building stockpiles as they face the same uncertain supply chains. While the inventory-sales ratio is higher than it was before the pandemic, government data show the value of finished durable inventories at its lowest level since 2013.
Some unattributed comments from respondents in the latest Kansas City Fed manufacturing survey hinted at concern about the level of stockpiles firms are facing, though for different reasons.
Indeed, manufacturers of big-ticket goods appear to be struggling to ensure they have the materials and supplies necessary to produce finished goods. Makers of nondurable merchandise such as apparel, petroleum products and chemicals are having greater success.
Institute for Supply Management data show that nearly half of manufacturers surveyed viewed their customers' inventories as too low in May, the highest in six months, which could underpin future production growth. Only makers of apparel said stockpiles among their customers were too high.
Vince Golle reports for Bloomberg News.
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllGreenberg Traurig Initiates String of Suits Following JPMorgan Chase's 'Infinite Money Glitch'
Delray Beach Financial Adviser Indicted in Alleged Illegal Tax Shelter Scheme
McGlinchey Opens Third Florida Office in Tampa, Hopes to Tap Region's Talent
2 minute readBuy-Now-Pay-Later Company Affirm Hit With Data Breach Class Action After Cyberattack on Banking Partner
Trending Stories
- 1Friday Newspaper
- 2Judge Denies Sean Combs Third Bail Bid, Citing Community Safety
- 3Republican FTC Commissioner: 'The Time for Rulemaking by the Biden-Harris FTC Is Over'
- 4NY Appellate Panel Cites Student's Disciplinary History While Sending Negligence Claim Against School District to Trial
- 5A Meta DIG and Its Nvidia Implications
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250